CASE REPORT
For some time now, personal injury practitioners have been wondering whether
it is possible or sensible for claimants to make Part 36 offers at 100%, or
99.9%, or at a similar level. The problem first came to my attention when I
fought a case for a claimant in which failure to wear conspicuous clothing and
a helmet were alleged to amount to contributory negligence. We felt that we
would win those arguments, and we did. We had been sufficiently confident to
offer to accept 100% and, when the judge made that award, we asked for indemnity
costs. The defence argued that we had not done better than our offer, and therefore
the provisions of Part 36 did not apply. The judge decided in our favour, and
the defendant appealed. Unfortunately, because the amount of money involved
was too small, the appeal was compromised.
The next opportunity came in Huck v Robson, Court of Appeal, 21st
March 2002. The Claimant was driving along a narrow country road. She saw
an oncoming car, so pulled into her side and stopped; the Defendant came round
the bend too fast in the opposite direction, braked, skidded, and collided with
the Claimant's car. On that basis the Claimant was bound to recover 100%. However,
the Defendant's account was different; he said that they both came round the
corner, saw the other, braked and skidded into each other. If that was correct,
apportionment would be 50/50.
The Claimant was confident that her version was correct, but was prepared to
accept a small discount for early settlement, and so offered to take 95% before
proceedings were commenced. The defence solicitors responded with 50/50. The
case went to trial, and the Claimant succeeded in full. The judge rejected the
claim for indemnity costs, saying that the offer of 95% was derisory and meaningless,
because he had never known a judge to apportion liability 95/5, and therefore
the prediction of that result by the Claimant's lawyers was unrealistic and
"nonsensical". The offer "was not an offer of anything". He completely failed
to understand that the offer was not intended to be a prediction of the result,
but was a commercial assessment of the value of an early settlement. When he
was told that he was bound to award indemnity costs unless it would be unjust,
he immediately, and without reflection, said that it would be.
We failed to get permission to appeal when we applied on paper, and only succeeded
when oral representations were made.
Part 36.10 provides that, if a person makes an offer to settle before proceedings
are begun, the court will take that offer into account when making any order
as to costs. Under Part 36.21, where at trial a defendant is held liable for
more than the proposals in the claimant's Part 36 offer, or where the judgment
against the defendant is more advantageous to the claimant, the court may make
the special costs and interest orders. The court will make the orders unless
it considers it unjust to do so and, in considering whether it is unjust, the
court will take into account all the circumstances of the case, including the
terms of the offer, the stage when it was made, the information available at
that time, and the conduct of the parties.
Part 44 deals with costs more generally. In deciding what costs order to make,
the court must have regard to all the circumstances, including conduct, success,
and an offer to settle, whether or not made in accordance with Part 36.
The Defendant's first argument was that the offer was not a Part 36 offer because
it was made before proceedings were commenced, and that therefore the provisions
of 36.21 did not apply. The court, not surprisingly, rejected this submission,
saying that there was no logical reason to distinguish pre-proceedings offers
from ones made after the action has been started. Indeed, there are very good
reasons why the consequences should be the same.
The Defendant next argued that, in order to qualify as a Part 36 offer, the
offer must be a genuine and realistic attempt to agree, and that an offer which
the defendant is bound to refuse does not meet that requirement. The Court of
Appeal accepted that the crucial question for a trial judge was whether it was
unjust to award a claimant indemnity cost despite the fact that she had beaten
her offer. Oddly though, only two of the judges saw the force of the argument
that an offer of 95% is not a prediction of the result, but is an offer of a
discount for early settlement. Still, two was enough for us to win.
There is a clear warning contained in the judgment. If it is self-evident that
the offer was merely a tactical step designed to secure the benefit of the incentives
provided by Part 36, for example an offer at 99.9%, the judge would have a discretion
to refuse indemnity costs. That comment seems to me to mean that claimants with
strong cases might be well-advised not to make a Part 36 offer; I cannot imagine
giving up 5% or 10% of a claim worth several million pounds simply to achieve
a quick settlement. On the other hand, an early offer in big cases can concentrate
defendants' minds wonderfully well, and the threat of indemnity costs and interest
can be sufficient to make them see sense. If claimants are discouraged from
offering to take 99% or thereabouts, as they are by this judgment, a small proportion
of large cases might not settle early. A discount of 1% on £5 million amounts
to £50,000, which is a pretty good discount for admitting liability in a case
which you are bound to lose, but that opportunity will probably now be denied
to defendants.
A subsidiary point was that the judge had not made any reference to having considered
the matters set out in 36.21(5). Although this is not obligatory, it "may well
be a counsel of prudence".
1018 words
15 May 2002
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